The Equities market again set a new high last night while the USD is also pulling back from its intraday high yesterday due to Industrial Production declined in April but noted that its Home Builder survey is rosy beating market expectation. Later today we will have US building Permit numbers and Unemployment Claims and if the number stack up we will probably see the USD resume the uptrend.

It seems that the strength in the Aussie has now give way to the bear with many leading economics and Funds are seeing the weakening AUD ahead. The view is that Australia economy is in real trouble with the accumulative debt, terrible manufacturing numbers, commodities prices getting soft and so the curtail in mining investments, add on to that we are now seeing slow in China.

In saying that do not expect a straight drop on the AUD, what we are looking for the bounce back up and any retrace higher is an opportunity to short. In the mean time we see that the AUD has been oversold and will not be surprise to see a short squeeze back up higher before a meaning downtrend resume on AUDUSD.

On the other hand we also see the NZD is still overrated and Australia is the biggest trading partner of New Zealand so higher NZD will do New Zealand no favour in term of trade with Australia. Last week the New Zealand did not hesitate to directly intervene with currency market when AUDNZD went below 1.2000 and we are of the opinion that it’s likely they will do it again in a very near furture.

AUDNZD – we are starting to accumulate on this pair due to the nature of its repeated pattern. Also, on a monthly chart it’s in the process of creating a bullish divergence while on Weekly it’s in the process of creating a Continuous Bullish Divergence plus extreme oversold and it’s now entering our Terminal Zone, currently prices has reaches our downside projection for this leg down.

On Daily, we are likely see a monster Bullish Divergence going to be created. We will accumulate on this pair with maximum stop stands at 1.1620. Our positions held currently is less than 1% Drawn Down so no panic. Weekly and Daily Chart below.

The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on author’s analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions. Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Increasing leverage increases risk. Before deciding to trade forex, you should carefully consider your financial objectives, level of experience and risk appetite.

With almost no impact news on Monday the FX market will probably trading in range and traders will probably look at what the Equities market for direction of trade. This week most of traders/investors will be looking closely at what FED chairman Bernanke has to say when he face the Senate to answer about the state of the economy and whether he is going to slow down the rate of printing anytime soon. It has been obvious that this market, especially the Equities has been on high and Bernanke is no doubt doing the steering.

So, if Bernanke is signalling of any chance of cutting back or even quash the QE we will see the USD strengthen even further and if he confirms of the FED commitment to stick to the QE for some times until they satisfy with the health of the economy then we will certainly see a weaker USD and a rally in the risk currencies such as GBP, AUD, EUR and off course the Equities will also shoot higher from an already record high.

Impact News today:

09:30pm (NY) AUD – Monetary Policy Meeting Minutes

Technical Analysis:

We are currently in 3 pairs: Long AUDNZD; Short GBPAUD and Short EURAUD.

In AUDNZD we are holding 3 positions, GBPAUD also 3 positions while EURAUD with 1 position. There are many of our new members might ask why are we holding 3,4 or even 5 positions on 1 pair so let us discuss about our trading strategy for a moment for those of you that are new and have not study our history records.

Our strategy is base on overbought/oversold that is out of sync with the fundamental. What we do is we determine a possible Terminal Zone on particular and when prices get into our Terminal Zone (assume no change in fundamental) we will set out the attack. Now, instead of buying/selling with 1 full contract we will split out the possible number Entry (depending on how big is the Zone. Says, if the Zone is 400 pips then we might split into 5 Entry position with each of 80 pips apart and each Entry is with 0.20 lots instead of 1 full contract. That way, we always keep out risk control in check and patiently wait for the fundamental kick in as the cycle turn. This strategy to us has been working very well so far and we do believe that by applying the fundamental behind the prices with the use of charts to enter with right approach of Risk control is the way to success in our trading career.

Here is an example of prices that is being overbought (way overbought) but the reason for it being overbought does have the fundamental back up to it and so we leave it alone and patiently wait until the dust settle then we will plan our attack. We suppose you all know which currency we are referring to. Yep, it’s the JPY. Looking at any Yen pair you will see that they are all overbought and look very extreme on the charts but hey, there are fundamental that back up the rise of these pairs and it’s due to the Japanese Government commitment to devalue the Yen with unlimited QE until inflation brought back to 2%.

Basically, our style of trade do rely on fundamental behind prices. We are as our motto suggest: Trader Become Investor. That is we spot the pair that is out of sync with the fundamental and have gone too far too fast then we will invest in it and patiently wait for the cycle turn. We do not afraid of initially holding in negative (although, it’s not a nice feeling). Just as long as have our risk control in place the trade will take care of itself and so far this strategy has prove fruitful to us over the last 10 months.

We hope that after reading this our newly join members will understand of our strategy and have the confident in us in managing your account.

Anyway, let get back to the chart on 1 of the pair that we entered last Friday: EURAUD - on daily chart, this pair has had a strong up leg since early April. It has a strong 100% retraced from previous leg down. This strong retrace has now present us with possible Negative Divergence on Daily chart. Looking at prices action we can see that last Friday it marginally broke previous high (Resistance) and close marginally above it. This morning it open it a gap down below the Resistance suggesting prices is facing downward pressure from overbought. According to the chart we will look for prices to pullback toward at least the 20MA. Chart Below:

The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on author’s analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions. Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Increasing leverage increases risk. Before deciding to trade forex, you should carefully consider your financial objectives, level of experience and risk appetite.

This morning Minutes from the Reserve Bank of Australia regarding their decision in lowering Interest rate back in May 8th. The Minutes did gave a dovish tone from the Governor Glen Steven which immediately send the AUD 50 pips lower on the news but has crawl its way back up to the day open prices an hour later. Remember this news is old news as the damage has already been done 2 weeks ago when they lower the Interest Rate by 0.25% which now stands at 2.75% which in our view is still high compare to the rest of the developed nations.

Again there isn’t much impact news on today and not until Wednesday where traders will look out for what Bernanke has to say under the grilling testimony in the Senate. As mention in yesterday report what Bernanke has to say will actually steer the market in the direction base on his wording. We will look forward to that.

Impact News today:

04:30am (NY) GBP – CPI Tentative JPY – Monetary Policy Statement

Technical Analysis:

We are still holding on 3 pairs currently with just under 1% Draw Down. Today let have a look at GBPAUD

Weekly chart – this pair has had 5 weeks to the upside and is still trading in a downtrend channel. Momentum has been in an overbought territory for the last 2 weeks (due to weakness in AUD after rate cut). From the weekly chart we mark down the possible Terminal Zone for the pair and look for prices to ease back to the down side from this current level.

On Daily chart – we had prices being rejected at the Resistance forming Doji 2 days ago and have more than 20 day candle riding the Bollinger Band for which on normal charting perspective is an indication of being overbought. Momentum indicator also telling us it is overbought as well as Negative Divergence. Our first target for the pair is the pullback, at least toward the 20MA.

The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on author’s analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions. Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Increasing leverage increases risk. Before deciding to trade forex, you should carefully consider your financial objectives, level of experience and risk appetite.

The market is now waiting to see what Bernanke has to say to the Senate. His wording is off course going to be well crafted and obviously he doesn’t want to be seen as the one that cause the panic, the selloff in the stock market. What traders are looking for in his testimony is any hint at all, if any, that he will taper the printing process any given time soon and as we said yesterday if Bernanke is looking at curving this printing process then we would likely see the risk currencies moving lower and strength will be given to the USD. If the Fed decides committed to the QE until a clear sign of recovery in the US economy there will be a relief rally on the risk currency.

The Pound yesterday took a dive after the inflation numbers came out below expectation and today during early Asian session the Australian consumer sentiment, as survey by Westpac Bank, falls -7% as compare to 5.1% previously. This put weighs on the AUD as it tried to crawl its way back up and has been trading in range of 50 pips over the last 3 days.

Anyway, we will see what Bernanke has to say tonight and how market react to his testifies to the Senate. What he said will probably pave the way for the market going forward into the next quarter.

We are still in 3 pairs. We exited 1 position for 70 pips gain yesterday and currently holding 6 positions with less than 1% Draw Down currently. Beside that there is nothing change technically and we have nothing to add for today before Bernanke testifies. Until then, Patient.

The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on author’s analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions. Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Increasing leverage increases risk. Before deciding to trade forex, you should carefully consider your financial objectives, level of experience and risk appetite.

Yesterday was just a messy bouncy market that moved on what Bernanke said and what the was said in the FOMC minutes. It looks as though Bernanke is at odd with other Fed members traders was initially sell down the USD when Bernanke confirmed that the Fed would continue its printing process of $85 billion/month as the economy is still relatively weak but then the release of the FOMC which indicated that the Fed did indeed talking about tapering the printing process with the likely time frame of late into the US summer. The USD then took a U-turn ran back up higher.

The AUD yesterday and early today faced with a double jeopardises. First, we have the FOMC minutes that adversely negative for the AUD and then early this morning during the Asian session we have Ford Manufacturing Plant in Australia announced of shutting down its operation after more than 90 years of operation in Australia. As evidence the Aussie manufacturing business is ailing and many big manufacturers are starting to look elsewhere. Off course this doesn’t happen overnight, this happens due to the high Aussie Dollars over the last few years as we have saying this over and over for the last 6 months. And only recently the RBA taking the proactive roll to lower rate, it’s just a tad too late.

Sorry guys for the technical error that happens earlier with an open position of larger than normal lots. Whew, we immediately got out of that position at breakeven.

We are now taking on this AUD trades which has been way oversold in a short term. We do believe, over the long term the AUD will head much lower but it won’t be a straight line drop....unless the RBA going to do the Abenomic kind of things with a commitment to Kamikaze the Aussie dollars which we very much doubt.

The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on author’s analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions. Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Increasing leverage increases risk. Before deciding to trade forex, you should carefully consider your financial objectives, level of experience and risk appetite.

What we have seen from yesterday from the Equity market which was quite different from what we would have seen from normal course of event in history. What we want to say is that the market behaviour in this recent times have the Central Banks written all over it. On normal market behaviour we would have likely see the S&P the Dow would head for a big fall after the Nikkei fell more than 7% during the Asian session (after news from the day before that the Fed is looking at tightening the belt on printing) and European market was also down in London of over 2% , add on to that, on pre-market open the Dow Jones indicated a drop of 140 points. If we looked back to 8 years ago and see the market behaviour like this we would have said that we are going for a heck of a ride to the downside on stock market and may as well drag the risk currencies down with it.

It was different this time, we saw the market open and run down in the first 2 hours or so and then crawled its way back to close just marginally down. So, why is this time different? Well, we have said it over and over again, this time we have Central banks around the globe cushioning the market: the Fed, SNB, BOJ, BOE, RBNZ and some others Central Banks passively involve by putting rates lower, recently we have South Korea, Israel...etc.

And so, early London open yesterday we witnesses 7% dropped on the Nikkei but then we thought to ourselves: Maybe the Asian market was pre-empting for a drop in the market, they must pre-empt a heavy selloff on the Dow and if we follow the herds and take action base on prices we would have joined them in the selloff. Nope, we did not join in on that one instead, we bought in the AUDUSD as prices reach our Terminal Level and stiff support 0.9600 and banks over 100 pips just over 4 hours later.

What we are saying to you all is that we are of a believe that if you can use your technical skill culminate it with your fundamental knowledge and ready to be proactive in the market instead of being reactive to price action. If you thought out your plan with the backup of fundamentals and at times you go against the herds, be contrarian and be proactive, seeing things before it happens and then plan your trades then sit back and patiently wait to harvest. If you can do that, more often than not you will end up winner.Impact News today:

The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on author’s analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions. Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Increasing leverage increases risk. Before deciding to trade forex, you should carefully consider your financial objectives, level of experience and risk appetite.

There is no impact news for today and also the US markets are closing today to celebrate Memorial Day therefore we do not expect much movement through the NY trading session.

Just to go over what happens last week. We have a first blip on the stock market beginning with Japan where the Nikkei dropped more than 7% on the day and the DOW dropped more than 400 points in 2 days but crawled its way back more than half of the fall. This is telling us that the Equities market are in the Nervous Nelly phase and market correction is just around the corner, maybe after 3 to 4 more weeks of pushing to the upside or ranging before we will get the big run to the downside. That’s our take for the market going forward over the next 3 to 4 weeks.

Impact News today:

None

Technical Analysis:

There has been a heavy selloff on the AUD and base on the AUD cross such as GBPAUD and EURAUD, both has had a great run to the upside and base on technical level on Daily they are at the extreme which is due for a good pullback before heading higher in a longer term as the Aussie economy start showing cracks. However, the state of economy in Australia is still in a much better shape than many other nations and with the attractive interest rate as compare to others and once the dust is settle we would soon see investor pouring back into the Aussie Bonds and push the AUD higher, unless the RBA decides to join in the Currency War and aggressively cutting interest rate then, all bets are off. But base on their reactive behaviour instead of being proactive they might not do much if the numbers out of China is improving.

Anyway, Let us look at EURAUD chart (GBPAUD also showing similar patterns): base on Daily, the momentum has been in the Overbought territory for more than 2 weeks with MACD showing Negative Divergence. Also, by examine the pattern of prices movement on every leg up for the last 4 up moves we can see that it moves of relatively same distance (Same for GBPAUD. Currently, prices has reach that level and there are stiff resistance for the pair moving forward. And we can see from last Thursday Candle Formation which formed a long tail inverse doji which suggest the temporary top is near. We are looking for the pair to pull back to the 20MA on Daily which is about 300 to 400 pips down.

The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on author’s analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions. Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Increasing leverage increases risk. Before deciding to trade forex, you should carefully consider your financial objectives, level of experience and risk appetite.